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Credit Card Rewards: Cash Back vs. Travel Points

If you’re planning your next getaway, you’re probably finding ways to get the most bang for your buck. Discount travel sites and vacation rentals can be great money savers, and buying airline tickets at the optimum time can end up cutting down on the cost of your plane ticket. However, while you’re figuring out what you can save, don’t forget about what you can earn. Credit card rewards can go a long way, especially for travelers.

If you travel frequently, it’s a no-brainer: you should be collecting some kind of travel bonus, whether it’s cash back, miles or hotel points. But even if you only get out of town once a year, you can still reap the rewards of credit card bonuses. Here is what to look for in a travel rewards credit card:

What Kind of Traveler are You?

There are two main credit card rewards for travelers: cash back on your purchases, and points or miles for travel-related spending (think airline miles and hotel discounts.)

Cash back credit card rewards are likely to be the best option for less-frequent travelers. This is the most flexible option. You’ll earn money on the dollars you spend, and those savings can go to your next Paris fund.

Credit cards that can get you travel discounts are suited for the more consistent traveler. Are you packing up and jetting off more than a few times a year? Then you can stand to earn some incentives to put toward your next trip. You will see two kinds of these cards: the hotel and airline points cards, and other travel-related discount options.

Consider Brand Loyalty

Hotel points and airline miles cards are a great fit for you if you like to stick to one main brand on your travels. If you like the consistency of booking with the same hotel chain or airline when you travel, there are some significant discounts and perks available for loyal customers.

This kind of card is limiting because the perks are for very specific discounts. However, the rewards rate tends to be higher than with more general rewards cards. It’s a smart choice if you will definitely be opting for a particular brand.

Travel Credit Card Rewards Pitfalls

You don’t want your credit card to end up costing you money in the long run. Those awesome travel perks can be slashed by a high-interest rate if you carry a balance on your card from month to month.

You should also be wary of the annual fee. It’s common for travel rewards cards to have an annual fee, especially if the rewards are more generous. That’s fine, provided that you will spend enough money to make that money back. Take the sign-up bonus and rewards into consideration along with the annual fee. You might want to look into other options if it doesn’t seem like it’ll pay off.

Keep an eye out for blackout dates, too. Some cards will only let you use your points for specific dates. You might want to find an option that is blackout date-free.

A rewards credit card is not a great idea if you’re already struggling with credit card debt. A healthy credit is required for the majority of travel rewards credit cards. But if your credit is in good standing and there are vacations or business trips in your future, there is likely a travel rewards card that will suit you.

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At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.

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Katie Brewer, CFP® is a Dallas, Fort Worth, and online fee-only financial planner with over 10 years of experience. Her passion is helping clients get their financial lives in order to start living their richest lives.

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